The Bank of New Zealand (BNZ) delivered a "solid performance" in the first quarter of its 2011-12 financial year, parent National Australia Bank (NAB) says in its quarterly trading update.

NAB said today in its first quarter trading update unaudited cash earnings for the three months to December 31 rose just under 8% to A$1.4 billion from A$1.3 billion in the same period of last year, which it described as a "solid" result reflecting increased revenue.

Of BNZ, NAB said it continued to deliver solid performance reflecting its ongoing focus on deposit growth and strong cost discipline in a slowly recovering economy.

"Revenue momentum has been supported by higher fee income and increased sales of risk management products for business banking customers," NAB said of BNZ.

"Net interest margin remained broadly stable for the period."

BNZ's net interest margins rose 14 basis points to 2.30% in the year to September.

NAB said BNZ's charge for bad and doubtful debts has fallen, reflecting a reduction in specific provision charges.

"The ratio of (BNZ's) 90+ days past due and gross impaired assets to gross loans and acceptances decreased to 1.40% at December 31 from 1.51% at September 30," NAB added.

Meanwhile, NAB said its group first quarter net interest margin fell to 2.19% from 2.28% in the half-year to September 30. The group has raised about A$7 billion of term wholesale funding this financial year to date with about A$4 billion of that through covered bonds. At the same time last year the NAB group had raised A$12.6 billion with a weighted average term to maturity of the funds raised 4.5 years, compared with 4.7 years so far this year.

NAB CEO Cameron Clyne said the goup has kicked off a strategic review of its British business, including Clydesdale Bank and Yorkshire Bank, given it now sees a "much longer period of subdued growth" in Britain than previously.  Clyne said many options would be considered although retaining the existing business structure was not an outcome on the agenda. Clyne expects NAB to announce the outcomes of its review by the time of the group's May interim results.

(Update includes NAB's plan to review its British business).